subject: Life Insurance Plans Explained [print this page] Securing the future of your loved ones, who depend on you, is a responsible gesture. When you invest in life insurance plans, you need to pay small sums of a predetermined amount, which acts as a cover in case of your untimely demise. The sum assured by the policy is handed over to your beneficiary after your demise. The returns and benefits of the policy depend on the kind of insurance plan chosen. If you are planning to invest in one of these insurance plans, then learning about the various types of life insurance is crucial.
Different kinds of life insurance
Term insurance and whole life insurance or permanent life insurance are the two basic types of insurance that are divided further into numerous subtypes. Apart from these two types, unit-linked insurance policies (ULIP), annuities and pensions are also widely chosen as investment, security and wealth creation options.
1.Term life insurance
Term life is an easily affordable type of insurance but it has no cash value. You cannot get the money except you pass away before the maturity of your insurance plan. There are various types of term life insurance.
Guaranteed level: This is the most popular type because of its low investment cost and long term life coverage benefits. You can pay its premium for a period of 1, 5, 10, 15, 20 or 30 years.
Return of premium: A bit more expensive, this plan offers guaranteed refunds of your money at its maturity. Sometimes they offer cash value like the whole life insurance if the insured person is alive. Premiums are paid in 15, 20 or 30 year terms.
Annually renewable: This insurance plan has increasing premium rates as a reflection of the age and probability of death of the insured person.
2.Whole life insurance
As the name suggests, these plans provide lifetime protection along with investment opportunities. Following are the types of whole insurance.
Cash value: Cash value typically increases on the basis of a predetermined schedule and endows death benefits once the policy is matured. The non-guaranteed cash value of this plan is made of dividends. Both these components enhance cash value of the plan.
Universal life: This plan separates death benefits, cash value and other expenses by bringing more flexibility to the plan. Certain administrative charges are deducted from the amount and timely interest is credited to the policy based on the cash value.
To age-100 level: With guaranteed level premium and death benefits till 100 years of age. This type of life insurance is sometimes covered under universal life with the phrase no-lapse rider. This rider allows full face amount of life coverage with no additional charges thereafter.
Second to die: One of the popular life insurance plans offers universal or whole life coverage plus death benefit at the death of the second insured person of the two, typically husband and wife.
by: Gunjan shastri
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